The People of America's Oil and Natural Gas Indusry

Oil Exports and the Federal Budget

Mark Green

Mark Green
Posted October 27, 2015

Reports by Bloomberg and others say that White House and congressional budget negotiators would sell oil from the Strategic Petroleum Reserve (SPR) to partially pay for their new budget agreement. Sales would total 58 million barrels from 2018 to 2025, according to a draft House bill (see Section 403-a).

How much money would be raised from the sales would depend on prices at the time of the sales. But, if the goal is generating revenue for government to fund worthy projects, rather than a series of one-time sales, why not lift the ban on U.S. crude oil exports and create an annual revenue stream?

According to a study by ICF International (Page 86), ending the 1970s-era oil exports ban would lift the U.S. economy, create jobs – and generate significant additional revenue for government. A number of other studies mirror ICF’s findings on the economic benefits from lifting the export ban. We highlight ICF here because its estimate of additional oil production from lifting the ban (up 500,000 barrels per day) is almost identical to the output increase estimated by the U.S. Energy Information Administration (470,000 barrels per day). ICF:

Federal, state, and local governments benefit from crude oil exports both in terms of the generation of GDP, which is then taxed at these levels, but also through royalties on federal lands where drilling takes place. Total government revenues, including U.S. federal, state, and local tax receipts attributable to GDP increases from expanding crude oil exports, could increase up to $13.5 billion in 2020.

ICF’s chart:

ICF government revenue from oil exports chart

ICF estimates that crude exports could cause government revenues to increase an annual average of $3.7 billion to $9.7 billion over the forecast period, depending on the multiplier effect. Government revenues include taxes on employee compensation, proprietor income, indirect business tax, household taxes and corporate taxes. ICF:

Government revenue increases due to crude exports are led by an increase in federal, state, and local tax receipts due to the increase in GDP, as well as a slight increase in federal land royalties for hydrocarbon production. Federal tax receipts comprise roughly 54 percent the total …

So, with ICF estimating that total revenues to government from lifting the oil export ban could total $13.5 billion in 2020, the federal share (about 54 percent) would be a little more than $7 billion. Again, we don’t know what prices the proposed SPR sales could command, but even at prices well above the current market, selling 58 million barrels of crude wouldn’t generate as much revenue as lifting the export ban.

Another caveat: It could take a few years to see the cumulative revenues from lifting the oil export ban exceed total revenues of the proposed SPR sales. Still, you can only sell a barrel of oil once, while lifting the crude oil export ban would generate annual revenues.

Another reason among many – including broader economic benefits, trade, security and help for consumers – for lifting the America’s outdated oil exports ban.

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.